RE SINOTRANS SHIPPING LTD

HCMP 2240/2018

[2019] HKCFI 323

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2240 OF 2018

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D E C I S I O N

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1.  On 13 November 2018 I made an order permitting the Company to convene a meeting of members of the Company to consider, and if they thought fit, approve a scheme of arrangement for the privatisation of the Company which is listed on the Main Board of the Stock Exchange of Hong Kong Ltd with stock code 368. The Company was listed on 23 November 2007. The meeting took place on 13 December 2018. On the same day, a special general meeting took place of the Company in order for the members to vote on a special resolution approving the reduction of capital, which is a technical component of the Scheme, as is common in privatisations of this sort.

2.  The Scheme involves an arrangement which constitutes a general offer within the meaning of section 707 of the Companies Ordinance, Cap 622.  Section 674 subsection (2)(a) determines the criteria by reference to which it is determined whether or not members have voted in favour of the scheme for the purposes of the ordinance.  Subsection 2(a)(i) provides that—

“… members representing at least 75% of the voting rights of the members present and voting, in person or by proxy, agree to the arrangement;”

that criteria was clearly satisfied.  There is also a negative criteria in subsection 2(a)(ii) that—

“the votes cast against the arrangement at the meeting do not exceed 10% of the total voting rights attached to all disinterested shares in the company;”

that criteria is not relevant as 10% did not vote against the resolution. 

3.  However, as Ms Lam has quite properly pointed out, if the old headcount test had still applied to the Scheme, then the Scheme would have failed as the majority of members who attended and voted in person or by proxy at the meeting in fact voted against it.  Self-evidently, those shareholders who voted against the privatisation were small shareholders.

4.  The principles by reference to which the court considers schemes to privatise public companies are well-established and summarised in my recent decision in Re Enice Holding Co Ltd [2018] 4 HKLRD 736:

“37. The function of the court at the hearing of a petition to sanction a scheme is to consider:

(a) whether the scheme is for a permissible purpose;

(b) whether members who were called on to vote as a single class had sufficiently similar legal rights that they could consult together with a view to their common interest at a single meeting;

(c) whether the meeting was duly convened in accordance with the court’s directions;

(d) whether members have been given sufficient information about the scheme to enable them to make an informed decision whether or not to support it;

(e) whether the necessary statutory majority has been obtained; and

(f) whether the court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of the class within which he voted might reasonably approve the scheme.

See Re Dorman, Long & Co Ltd;[1] Re China Light & Power Co Ltd;[2] Re Cable & Wireless HKT Ltd;[3] Re PCCW Ltd;[4] Re Wheelock Properties Ltd;[5] Re Cheung Kong Holdings Ltd;[6] and Re China Assets (Holdings) Ltd.[7]

38.   First, it is well-established that privatising a listed company is a permissible purpose for a scheme of arrangement: see Re Wheelock Properties Ltd [8] and Re China Assets (Holdings) Ltd.[9]”

5.  It is well-established that a privatisation is a proper purpose for a scheme.  I am satisfied that the Scheme was properly explained to shareholders and that it was on terms which a reasonable shareholder, properly directed himself to his interests, could approve.  There is nothing unconventional in the terms of the Scheme and no shareholder has appeared at today’s hearing of the petition to oppose it.  I will, therefore make an order in the terms of the draft handed up to me by Ms Lam.